Why Home Flippers Are Nervous

The percentage of homes flipped in the third quarter dropped to 5.1 percent of single-family and condo sales or 45,718 homes, a new report released by ATTOM Data Solutions shows. The number of homes flipped is receding from a six-year high of 53,892 homes reached in the previous quarter. The report defines a home flip as a property that is sold for the second time within a 12-month period. ATTOM Data Solutions used publicly recorded sales deed data in more than 950 counties for its report.

“While the macro trends of low housing inventory and rising home prices are favorable for flippers, they are also a double-edged sword, attracting more competition and reducing the availability of deals — particularly in the most fundamentally sound local markets,” says Daren Blomquist. “This is chasing some investors into markets and neighborhoods that may be less fundamentally sound but also offer more value-add opportunities for flippers in the form of aging housing inventory.”

Homes flipped in the third quarter sold, on average, for $190,000. The average gross flipping profit was $60,900 more than the average purchase price of $129,200, the report shows. The average gross flipping return on investment was 47.1 percent of the purchase price, down slightly from 47.9 percent a year ago. But those numbers don't reflect pure profit, Blomquist cautions. 

“While the high-level gross flipping profits are impressive, it’s important to note that they do not include all the costs incurred by flippers, including rehab, financing, property taxes and other carrying costs,” he says. “It’s also important to note that the overall averages mask the fact that not every flip ends profitably for the investor. About 8 percent of the homes flipped in the third quarter actually sold for less than what the flipper purchased them for, and about 21 percent of the flips yielded a gross flipping ROI below 10 percent — likely meaning the flipper walked away with a net loss on the deal.”

The metro areas seeing the highest rates of home flipping are:

• Memphis: 11%
• Clarksville, Tenn.: 9.5%
• Deltona-Daytona Beach-Ormond Beach, Fla.: 9.3%
• Tampa-St. Petersburg, Fla.: 9.3%
• Visalia-Porterville, Calif.: 9.3%
• York Hanover, Pa.: 9.2%
• Lakeland-Winter Haven, Fla.: 9%
• Fresno, Calif.: 8.7%
• Miami: 8.6%
• Las Vegas: 8.2%

Source: RealtyTrac

Easy Property Upgrades to Conserve Water

Many states are facing a drought, and home owners and renters are increasingly under pressure to conserve.

“Often we’re bombarded with a message of sacrifice and cutting back,” says Benjamin Inskeep, a research analyst at EQ Research, who helped compile “The Water Short List,” a report highlighting conservation ideas. “One of the conclusions of our paper was that simple, out-of-sight and out-of-mind [actions] offer a huge opportunity to reduce your resource consumption.”

Here are a few water-saving ideas from the report that you can recommend to clients:

Swap out the shower head: Did you know showers account for 20 percent of water consumed in a household? The average American household uses up to 30 gallons a day for showers, according to the Water Research Foundation. But WaterSense-labeled shower heads, claim to use less than 2 million gallons a minute, which means switching to one could help save a whopping 2,900 gallons a year. 

Tips for Your Listings

Curb Appeal in a Time of Drought

Water-Free Ways to Spruce Up Landscaping

Retrofit faucets: Kitchen and bathroom faucets are another big culprit of household water use, accounting for about 19 percent of indoor water use. Due to new federal requirements, contemporary models limit usage to 2.2 gallons per minute, compared to the 2.75 to 7 gallons of water per minute used by many older faucets. Homeowners who aren't ready to replace can retrofit an older faucet with an aerator, an insert that mixes air with water to control the stream and conserve water.

Upgrade appliances: Washing machines built prior to 2003 tend to use much higher levels of water per load than newer models. The Energy Star website asserts that a standard clothes washer more than 10 years old costs home owners an average of $210 a year.

Curb outdoor irrigation: Inskeep says that for some families, especially those watering large lawns in arid climates, outdoor water use can make up the majority of the household's water use. Set up a backyard rainwater collection system or plant a “water-wise garden” of native species that are well-equipped for the local climate.

Source: “Water Conservation at Home: 6 Easy Steps to Help You Save,” Curbed.com (Dec. 8, 2016)

Holiday Décor Tips and Tricks for Sellers

Some home sellers use the holidays to showcase the warmth and character of their home to potential buyers. But they need to be careful not to cover up their home’s finest attributes with their festivity.

Read more: Rules for Tasteful Holiday Décor

A recent article at Houzz provides some of the following tips for holiday decorating when your home is for sale:

Watch the size of the decorations. Displaying large multipiece holiday decorations on your fireplace, for example, may cover up this important selling feature. Ask yourself: Does this piece positive showcase the space, light, and charm of the room? Or does its large size distract from it? This includes the Christmas tree. Owners may want to choose a smaller size when they’re selling because larger trees and decorations can make a room appear smaller, notes Houzz columnist Neila Deen.

Don’t block the light. Make sure the holiday décor doesn’t cover up any natural light from windows and doors. Sure, owners love to display their Christmas trees in front of windows so you can see it from the outside. But they need to realize that they could be covering up a picturesque window as well as making a room appear darker. Instead, place the tree far away from the window so that it isn’t blocking any natural light from flowing in.

Coordinate colors. Keep the holiday décor in line with the room’s overall color-coordinated design. If the holiday decorations clash with a current color scheme, don’t use them. Metallics – gold, silver, or copper -- are a good way to add holiday décor accents without fears of clashing. White also can be a good choice. Consider swapping out multicolored tree lights with sparkling white lights for a more elegant choice, Deen notes. 

Source: “The 7 Do’s of Holiday Decorating When Your Home Is for Sale,” Houzz (Nov. 26, 2016)

The Suburbs Are Having a Moment

America largely remains a suburban nation. Younger generations threatened to change that, with many expressing a greater desire to live in urban locations, but their numbers lately are showing a shift to the suburbs.

Read more: Millennials Want the 'Anti-Suburb Suburb'

The suburbs are outstripping downtowns in overall population growth, diversity, and younger residents, according to a new study of population trends and housing by the Urban Land Institute’s Terwilliger Center for Housing.

Seventy-nine percent of the population in the 50 largest metros live in suburban areas. From 2000 to 2015, suburban areas accounted for 91 percent of the population growth and 84 percent of the household growth, the study shows. What’s more, three-quarters of people age 25 to 34 in those metro areas are opting to live in the suburbs.

The main motivators that have traditionally sent people packing to the suburbs are still high priorities today: Lower-cost of housing and proximity to jobs. In 2014, about two-thirds of jobs in the 50 largest metros were located in the suburbs.

The study’s findings, however, also note several challenges ahead for suburbs as they face swelling populations. For example, researchers note that city officials will need to evaluate how they provide services such as public transportation in less-affluent suburban areas, particularly as more people become spread out and the fact that there are less established nonprofit bases in the suburbs than urban areas.

Source: “Evolving U.S. Suburbs Continue to Shape Residential Demand and Development,” Urban Land Institute (Dec. 5, 2016) and “Suburbs Outstrip Cities in Population Growth, Study Finds,” The Wall Street Journal (Dec. 5, 2016) [Log-in required]

Buyers' Secret Must-Have: A Snore Room

One in four couples admit to sleeping in separate rooms. And snoring may be a big reason keeping couples apart at night.

Snoring gets common – and maybe louder – as people age too. Thirty percent of people over the age 30 snore, 40 percent over the age of 40 snore, and by age 60, 60 percent of men snore and 40 percent of women, according to the Statistics Brain Research Institute.

Read more: Style a Master Bedroom as a Sleep Retreat

Architect Deryl Patterson at Housing Design Matters writes in a column at BUILDER about how homebuilders should look at how to discreetly market to the 55-plus buyer that they can sleep separately from their partner with a snore and more room. It can be done by adding rooms off the master bedroom that look like a den during the day, but can be closed off and then can offer sanctuary to a snoring mate at night. Dual master suites may be another solution, which also has the added bonus of “no more arguing over closet space or the toilet seat being left up or down,” Patterson notes.

Snoring isn’t the only reason couples may like a flexible room to send their spouse to at night. Different sleeping habits, such as one spouse who gets up early and one who gets up late, may be another reason for separate rooms or a flexible space to adapt into one, when needed. Patterson has been urging builders to bring such design ideas to the NEXTadventure home at the 2017 International Builders’ Show in Orlando.

“Since we all change as we age, acknowledge and accept the changes by designing homes that respond to how the 55-plus buyer really lives,” Patterson writes in her column at BUILDER. “Don’t just offer solutions to problems—design homes with dignity to allow the 55-plus cohort to age gracefully.”

Source: “Who Needs Sleep? Everyone.” BUILDER (2016)

Buyers Are on the Hunt for the ‘Healthy Home’

With growing concern over soaring allergies and child asthma rates, more Americans are taking a closer look at their homes and how they may be affecting their health. It’s prompted some home buyers to look at the amount of toxins a home may be emitting as well as its air quality.  

Read more: Understanding VOCs and Indoor Air Quality

In 2009, a survey conducted by homebuilder Meritage Homes revealed a growing concern among homeowners about the impact a home could have on their health. It motivated the builder in 2014 to add features to improve airflow and reduce toxins in its homes, such as improved air filters, whole-house water treatment, and low-emitting materials.

It also prompted more salespeople to ask buyers about any respiratory issues too when helping them to locate the right home. In the U.S., 17.7 million adults and 6.3 million children have asthma and more than 50 million Americans suffer from allergies.

Evolutionary Home Builders has made building a healthy home its primary focus. The company’s Evolutionary Pro Homes are marketed to meet the physical needs of professional athletes and designed to provide more oxygen, fresh air, and negative ions than traditional homes. The builder also claims it reduces the levels of toxins and allergens in its homes. Brandon Weiss, the founder of the company, says doctors have shown, via pre- and post-occupancy, how improved indoor environments can enhance performance.

More homebuilders are considering whether healthier building standards should be added to their homes too. However, the extra costs associated with building this way has been a big area of concern. But costs are heading down, which has prompted more builders to consider what elements they can offer.

Some builders are opting to become a partner in EPA’s voluntary Indoor airPLUS certification program. The certification program was launched in 2009 to provide construction specifications that protect indoor air quality. It’s recognition for builders who go “above and beyond” building standards in creating healthier indoor environments, says Bob Axelrad, EPA senior policy adviser for indoor environments.

Participants see indoor air quality and health as “the next important value proposition that they have to offer home buyers,” Axelrad says.

Other programs to help home owners determine the health of a home include WELL Building Standard, LEED for Homes, International Living Future Institute, the Healthy Building Network and BuildingGreen’s Health Product Declaration Open Standard, Greenguard, and Cradle to Cradle.

“Overall, health is a strong purchase driver, and there’s increasing concern about indoor air quality,” says Lee Ann Head, Shelton Group’s vice president of research. “But there’s work to be done to better communicate about the topic.”

Meritage Homes says at first they promoted a home’s health-based benefits along with energy efficiency. But they found the message wasn’t resonating. Buyers also were getting intimidated by the jargon, such as MERV (maximum efficiency rating value) air filters and low-VOC (volatile organic compound) materials. Now, its sales team focuses on “reminding consumers that they can and should have a better functioning home than they’ve had,” says C.R. Herro, vice president of energy efficiency and sustainability for Meritage.

Indeed, “we’re starting a conversation to get people to realize, wouldn’t it be great to have fresh air to breathe? Wouldn’t it be great to have a new house that doesn’t smell like a new car?” says Carl Grimes, managing director of the Hayword Healthy Home Institute. “It’s possible, and it doesn’t have to cost much more or even more to build a lot of these features into homes now.”

Source: “The Next Big Thing: Healthy Homes,” BUILDER (Nov. 30, 2016)

Porch Pirates on the Hunt This Holiday Season

As online shopping grows in popularity, the number of porch pirates is growing. Packages left near doorsteps can be motivation for thieves to swipe unopened boxes from porches or even mailboxes.

Read more: Bah-Humbug! Holiday Lights Spark Feuds

Twenty-three million Americans have had packages stolen from their home before they could open them, according to a recent study by InsuranceQuotes.

The online shopping trend is increasing opportunities for thieves to swipe from doorsteps. Shoppers now make 51 percent of their purchases online, up from 47 percent in 2014, according to a report by Fortune.com in June.

“The holidays are a fun, festive time to celebrate with friends and family. Unfortunately they are also a busy time for criminals,” says Ryland Madison, director of marketing for home automation and security firm Cox Homelife. “Homes and porches are filled with presents or left empty due to holiday travel. These become prime targets for theft.”

How can home owners keep their packages more secure from would-be thieves? Instead of having the package delivered to their doorstep, owners may want to have their packages held at the local post office or a private delivery facility, such as UPS or FedEx, advises Sarah Brown, a home safety and security expert for SafeWise.com.

“Although this option is not always the most convenient, it ensures your package is in good hands,” Brown says. “And if you have several packages coming throughout the season and don't have the time to pick up every single one, installing an outdoor security camera can offer an added layer of protection to your front porch. Often times thieves live nearby, and catching them on camera will more likely help you retrieve anything that’s stolen.”

Further, Madison suggests home owners have neighbors or a friend collect mail while they’re away (or have your packages delivered directly to them, with permission, while you’re away), and put a stop to newspaper, magazine, and mail deliveries so it’s not obvious that you’re away during the holiday.

Home owners also should beware of other potential holiday hazards, besides porch pirates. InsuranceQuotes’ study also found 7 million Americans have had a guest injured in their home, 16 million Americans have experienced a house fire due to a cooking accident, and 2 million Americans have experienced fires caused by Christmas trees and other holiday decorations.

“Half of all house fires originate in the kitchen, regardless of the time of year,” Brown says. “And since the kitchen is producing an excess amount of food during the holidays, it is especially important to keep an eye on your oven and keep combustible items away from the stove.”

Source: “Avoid Merry Mishaps – From Package Thefts to Fires – With These Insurance and Holiday Safety Tips,” InsuranceQuotes.com (Nov. 29, 2016)

10 Housing Markets to Envy in 2017

The national housing market is largely predicted to moderate in 2017, but a handful of metros are expected to beat expectations. In fact, 10 markets are looking like hot-beds for growth in the new year.

Read more: Housing Trends to Watch in 2017

Realtor.com®’s research team has flagged markets that will likely see average price gains of 5.8 percent and sales growth of 6.3 percent in 2017. Those gains would exceed next year’s anticipated national growth of 3.9 percent in home prices and 1.9 percent in home sales.

As such, real estate professionals in these 10 markets should expect a booming business in 2017. Realtor.com® notes these are the hottest housing markets to watch in the new year, based on price and sales gains:

1. Phoenix-Mesa-Scottsdale, Ariz.

2. Los Angeles-Long Beach-Anaheim, Calif.

3. Boston-Cambridge-Newton, Mass.-N.H.

4. Sacramento--Roseville--Arden-Arcade, Calif.

5. Riverside-San Bernardino-Ontario, Calif.

6. Jacksonville, Fla.

7. Orlando-Kissimmee-Sanford, Fla.

8. Raleigh, N.C.

9. Tucson, Ariz.

10. Portland-Vancouver-Hillsboro, Ore.-Wash.

Why are expectations so high for these 10 markets? Realtor.com®’s research team notes that strong local economies and population growth are helping to fuel sales. Also, the top 10 housing markets have other commonalities, such as relatively affordable rental prices, low unemployment, and large populations of millennials and baby boomers.

Source: “Realtor.com® Forecasts Post-Election Economy to Result in Higher Mortgage Rates While Housing Delivers Slower Gains in 2017,” realtor.com® (Nov. 30, 2016)

Kitchen Features Buyers Will Pay More For

A great kitchen can help you sell a home, and real estate professionals are making sure to spotlight it in their marketing.

Read more: 9 Modest Fixes for the Problem Kitchen

Of all the homes listed for sale on realtor.com®, 69 percent of the listing descriptions highlight the kitchen as a selling point. Forty-nine percent mentioned the bedrooms and 35 percent highlighted the garage, the next two most popular.

Further, homes that tout a “killer kitchen” or “luxury kitchen” in their descriptions sell 8 percent faster than a similar-sized home in the same ZIP code, realtor.com®’s research finds.

So which kitchen features could possibly add the most value to a home? Realtor.com®’s research team pinpointed the following:

Custom cabinetry: 41% (the price premium: the difference between homes with the feature and homes without in the same ZIP code)

• Kitchen island: 30%
• Creative lighting: 21%
• Granite counters: 18%
• Large pantry: 14%
• Stainless-steel appliances: 12%
• Tile backsplash: 7%
• Breakfast bar: 6%

What’s more, the research team found growing demand for the “chef’s kitchen.” About 4.7 percent of homes on the market describe the kitchen as a “chef’s kitchen” or “gourmet kitchen,” which is up from 3.3 percent three years ago. Homes with such labels boast a median list price of $589,900.

Some of the most common features associated with a chef’s kitchen: Oversized fridge; dual commercial-quality ovens; six-burner stovetop; and a butler’s pantry. Other popular features may include a wet bar and wine fridge too.

Source: “Secrets Inside the Pantry: How the Kitchen Became Real Estate’s Most Valuable Room,” realtor.com® (Nov. 21, 2016)

What You Have to Be Thankful for in Housing

What fall slowdown? In many markets across the country, the housing market is showing anything but the typical seasonal slowdown. In fact, a new report released this week by the National Association of REALTORS® shows just the opposite.

Existing-home sales eclipsed June’s cyclical sales and, in October, zoomed to the highest annualized pace in nearly a decade, according to NAR’s latest report. All major regions saw an increase in sales last month as well.

It’s a good time to be in the real estate business. And, this Thanksgiving season, you have plenty to be thankful for.

The economy is improving: The economy is largely expected to continue growing, at least at a moderate pace, next year. Growth will lead to slightly lower unemployment, which can help boost consumer confidence. What’s more, a growth in jobs often translates into more households looking for homes, writes Jonathan Smoke, realtor.com®’s chief economist, in a recent column at that site.

Powerful buying forces emerge: Two major demographic shifts are at play in the current housing market that could profoundly drive sales in the coming years: millennials and retiring baby boomers. “We are now in the midst of two massive demographic waves that will power above-average demand for homes for at least the next 10 years,” Smoke says. The median age of a first-time buyer this year was 32, according to the National Association of REALTORS®’ 2016 Home Buyer and Seller Report. Next year, 4.4 million people in the U.S. will turn age 32. Further, the second-largest generation is now moving into retirement. Americans ages 65 to 74 are in a key age range where housing decisions are being made, which typically involve a home sale and a purchase. Over the next five years, the number of people in the U.S. over the age of 65 is expected to increase 18 percent, while the population overall grows only 4 percent.

Foreclosures are plummeting: Foreclosure inventory plunged 31 percent in September and completed foreclosures dropped 7 percent year over year, according to data from CoreLogic. What’s more, the number of mortgages in serious delinquency (defined as 90 days or more past due including loans in foreclosure or REO) dropped by 25 percent in September year over year and areat the lowest level since August 2007. “Completed foreclosures have fallen by a total of more than 100,000 homes during the 12 months prior to September 2016,” said Anand Nallathambi, president and CEO of CoreLogic. “The decline in foreclosures is one of the drivers in the drop in vacancies, which is positive for homeowners and communities. Heading into 2017 we see that prices, performance and production – the three most important drivers of the real estate market – are all improving.”

More new-homes entering the pipeline: Housing starts rose 25.5 percent in October, reaching a seasonally adjusted annual rate of 1.3 million, the Commerce Department reported last week. It is the highest pace since August 2007. Single-family housing starts reached a nine-year high in October, reaching a rate of 869,000. 

“These robust figures correlate with strong builder optimism in the housing market,” says Ed Brady, chairman of the National Association of Home Builders. “A firming job market, a growing economy, and rising household formations will keep the housing recovery on track into next year.”

Drones are flying: Long-awaited guidelines were released in June that have allowed more real estate professionals to incorporate drones into their marketing. They’re capturing aerial pictures and videos of properties to lure buyers. The Federal Aviation Administration released its final rule on commercial drone use in June. You still have to abide by guidelines. Operators are required to now obtain a Part 107 certificate, which replaced the previous Section 333 waiver. Operators also no longer are required to hold a pilot’s license. Still, operators must take a test before flying, and they must retake that test every 24 months in order to operate drones. Also, there are restrictions on the number of activities you can do with a drone (such as FAA prohibitions against flying a drone over a person or flying at night).

“Businesses are more and more finding opportunities to utilize drones as a way of cutting costs and better serving customers,” says Tom Salomone, NAR’s immediate past president. “That’s true in real estate and other industries as well. As application of this technology picks up, the regulatory landscape will likely continue to evolve.”

By Melissa Dittmann Tracey, REALTOR® Magazine’s Daily News

The Autumn Revival: Home Sales Surge

For the second consecutive month, existing-home sales were on the rise, ascending above June’s cyclical sales peak to become the highest annualized pace in nearly a decade, the National Association of REALTORS® reported Tuesday. All major regions across the country saw an increase last month.

Regional Breakdown

Here is a closer look at existing-home sales across the country:

• Northeast: existing-home sales rose 1.4 percent to an annual rate of 750,000, and are 1.4 percent higher than a year ago. Median price: $255,500 -- 2.9 percent above a year ago.
• Midwest: existing-home sales increased 2.3 percent to an annual rate of 1.36 million in October, and are 6.3 percent above a year ago. Median price: $181,500, up 5.8 percent from a year ago.
• South: existing-home sales rose 2.8 percent to an annual rate of 2.22 million, and are 4.7 percent above a year ago. Median price: $202,300, up 7.4 percent from a year ago.
• West: existing-home sales increased 0.8 percent to an annual rate of 1.27 million in October, and are 10.4 percent higher than a year ago. Median price: $345,800, up 7.8 percent from a year ago.

Source: National Association of REALTORS®

Total existing-home sales – which are completed transactions that include single-family homes, townhomes, condos, and co-ops – increased 2 percent to a seasonally adjusted annual rate of 5.60 million in October. The pace of existing-home sales  is 5.9 percent higher than a year ago (5.29 million), rising above June’s pace of 5.57 million. It was the highest sales pace since February 2007.

Lawrence Yun, NAR’s chief economist, is calling the sales increase an “autumn revival” for the housing market.

“October’s strong sales gain was widespread throughout the country and can be attributed to the release of the unrealized pent-up demand that held back many would-be buyers over the summer because of tight supply,” Yun says. “Buyers are having more success lately despite low inventory and prices that continue to swiftly rise above incomes.”

Further, the tightening labor market is pushing up wages and the economy is showing greater expansion, Yun says. “These two factors and low mortgage rates he kept buyer interest at an elevated level so far this fall,” he adds.

5 Stats to Gauge the Market

Here’s a closer look at some key indicators with existing-home sales from NAR’s latest data release.

1. Home prices: The median existing-home price for all housing types in October was $232,200. That is a 6 percent increase from a year ago.

2. Days on the market: Forty-three percent of homes sold in October were on the market for less than a month, according to NAR’s report. Properties stayed on the market an average of 41 days in October, down from 57 days a year ago. Short sale properties were on the market the longest amount of time for a median of 99 days; foreclosures typically sold in 50 days; and non-distressed homes were on the market a median of 39 days.

3. All-cash sales: Transactions involving all-cash consisted of 22 percent of sales in October, down from 24 percent a year ago. Individual investors account for the biggest bulk of cash sales. They purchased 13 percent of homes in October, unchanged from a year ago.

4. Distressed sales: Foreclosures and short sales comprised 5 percent of sales in October, down from 6 percent a year ago. Four percent of last month’s sales were foreclosures and 1 percent were short sales. Foreclosures sold for an average discount of 18 percent below market value last month while short sales were discounted an average of 16 percent.

5. Inventories: Total housing inventories dropped 0.5 percent to 2.02 million existing homes available for sale by the end of October. That is 4.3 percent lower than a year ago. Unsold inventory is at a 4.3-month supply at the current sales pace.

Source: National Association of REALTORS®